US, Mexico reach trade "understanding", Trump threatens to cut out Canada

U.S. and Mexico make NAFTA breakthrough, increasing chances of final deal

The North American Free Trade Agreement was signed by Canada, Mexico, and the United States in 1993, during the presidency of Bill Clinton.

Regardless of Trump's claims of reaching an entirely new trade deal, the new agreement does seem to bring the three countries much closer to a potential NAFTA rewrite more than 25 years after it took effect.

The president dubbed the pact the "United States-Mexico Trade Agreement", saying he wants to do away with the NAFTA moniker because it carries negative connotations.

Mexican President Enrique Pena Nieto tweeted just before the announcement that he spoke to Canadian Prime Minister Justin Trudeau about the status of NAFTA negotiations and progress the USA and Mexico have made, and expressed the importance of his involvement in the negotiations.

President Trump added, the move will be an "incredible deal" for both countries, especially for the manufacturing and farming industries. Details of the U.S. -Mexico agreement were expected to be unveiled later Monday.

Following the July election of Andres Manuel Lopez Obrador, Trump predicted that he will have a "very good relationship" with the newly-elected Mexican president.

"We'll get rid of the name NAFTA", Trump said.

"Given the encouraging announcement today of further bilateral progress between the USA and Mexico, Minister Freeland will travel to Washington, D.C., tomorrow to continue negotiations".

Trump, who has had a strained relationship with Mexican President Enrique Peña Nieto over his demands that Mexico pay for a border wall, cited "closer" ties to America's southern neighbor on Saturday.

The deal also would require 40 percent to 45 percent of auto content to be made by workers earning at least $16 per hour, the second official said.

USA automakers have opposed raising the North American content requirement, but the United Auto Workers union has supported it.

Shares of traditional US automakers were some of the best performers of the day.

"While any news of progress on restoring Nafta certainty is reassuring for American farmers, there are questions that remain on the nature of a final deal", Brian Kuehl, the organisation's executive director, said in a statement.

Trump did say he was willing to give Canada a chance to have a separate deal or be folded into the agreement signed with Mexico. In response, Mexico slapped tariffs on $3 billion of United States goods, including steel, pork, apples, potatoes, bourbon and different types of cheese.

During an Oval Office briefing with reporters, Trump awkwardly spoke with Mexican president on speaker-phone, hailing the new agreement as a breakthrough. But Trump and other critics say it encouraged USA manufacturers to move south of the border to exploit low-wage Mexican labor.

The Trump administration said the deal improves labor provisions.

If Canada is excluded in the new deal, it would mark a major shift in US trade policy.

That is, if Canada's re-entry into the talks and political posturing do not add new roadblocks to the negotiations.

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